北美精算师2005年宝贵真题Course8IU（第三块），继续学好，千万别松懈哦，10月底附近就要开考啦！只剩下2个多月了！
　　7. (7 points) XYZ Life produces value-based financial statements.
　　You are given:
　　? The hurdle rate is 12%.
　　? The risk-free rate of return is 4.0%.
　　? The inflation rate is 1.5%.
　　? Beta is 2.0.
　　(a) (1 point) Describe the CAPM formula and calculate the implied rate of return on
　　average equity investments.
　　(b) (2 points) Describe validation techniques used to *uate the accuracy and
　　reliability of model office projections used in value-based financial analysis.
　　(c) (4 points) ABC Life offers the same term life insurance product as XYZ. XYZ’s
　　premiums are 5% higher than ABC’s. Both companies have the same inflation,
　　investment and hurdle rates.
　　XYZ has priced the product to achieve an IRR of 13%.
　　(i) Compare first year earnings for XYZ for the following reporting methods.
　　? US GAAP,
　　? Value-based financial reporting, and
　　? Level ROE financial reporting.
　　(ii) Determine which company would report higher first year earnings under
　　each of the reporting methods. Justify your answer.
　　Course 8I: Fall 2005 -8- GO ON TO NEXT PAGE
　　Individual Insurance – U.S.
　　Morning Session
　　8. (4 points) Senior management would like to introduce a commission schedule that
　　eliminates vesting entirely. In return, agents will be paid higher commissions. Currently,
　　all commissions vest to agents at the time of a sale.
　　You are given:
　　Current renewal commission scale:
　　t 1 2 3
　　rt 3% 3% 3%
　　Ot 0 0 0
　　Pt 1.0 0.90 0.80
　　Proposed renewal commission scale:
　　t 1 2 3
　　rt 5% 5% 5%
　　Ot 0 0.05 0.10
　　Pt 1.0 0.95 0.90
　　where:
　　t = policy year
　　r = commissions as a percent of the gross annual premium
　　Ot = probability that premium on new business is written by agents who leave
　　before business enters policy year t
　　Pt = probability that the annual premium for the policy year t will be paid
　　? The discount rate is 3%.
　　? Expected sales under current compensation scale are $10.0 million of premium.
　　? Expected sales under proposed compensation scale are $10.5 million of premium.
　　? Expected expenses excluding commissions are 10% of premium.
　　Select the commission schedule that produces the highest net revenue for the company.
　　Show all work.
　　Course 8I: Fall 2005 -9- STOP
　　Individual Insurance – U.S.
　　Morning Session
　　9. (4 points) ABC Life is concerned about the trend of its fixed annuity sales relative to the
　　rest of the industry.
　　(a) Describe available sources of data that may be used to *uate the trend in fixed
　　annuity sales.
　　(b) Describe issues for ABC to consider in deciding whether to withdraw from the
　　fixed annuity market.
　　**END OF EXAMINATION**
　　MORNING SESSION
　　Course 8I: Fall 2005 -1- GO ON TO NEXT PAGE
　　Individual Insurance – U.S.
　　Afternoon Session
　　**BEGINNING OF EXAMINATION 8**
　　INDIVIDUAL INSURANCE – U.S.
　　AFTERNOON SESSION
　　Beginning with question 10
　　Question 10 pertains to the Case Study
　　10. (4 points) Mercury Life plans to enter the individual term life insurance market using a
　　brokerage distribution system.
　　(a) Assess this plan in relation to Mercury’s strengths and weaknesses.
　　(b) Assuming Mercury’s goal is to increase market share through broker
　　relationships:
　　(i) Determine the appropriate pricing objective.
　　(ii) Describe the advantages and disadvantages of this objective.
　　(c) Assuming Mercury’s goal is to increase market share through consumer
　　relationships:
　　(i) Determine the appropriate pricing objective.
　　(ii) Describe the advantages and disadvantages of this objective.
　　Course 8I: Fall 2005 -2- GO ON TO NEXT PAGE
　　Individual Insurance – U.S.
　　Afternoon Session
　　11. (6 points) Your company is proposing to sell a block of life insurance business to another
　　company.
　　(a) Describe factors to consider before deciding to sell the block.
　　(b) Explain reinsurance structures available to facilitate the sale of a block of life
　　insurance business.
　　(c) Describe goodwill and explain its impact on the transaction.
　　Course 8I: Fall 2005 -3- GO ON TO NEXT PAGE
　　Individual Insurance – U.S.
　　Afternoon Session
　　Question 12 pertains to the Case Study.
　　12. (8 points) You are given the following information with respect to Saturn Life’s term
　　insurance financial statements:
　　? Saturn uses the same definition of GAAP free cash flow and GAAP surplus as found
　　in TSA 38 Strategic Management of Life Insurance Company Surplus.
　　? Solvency-based reserves are equal to GAAP income-based reserves.
　　? After-tax investment income on required capital for 2003 is $2,750,000.
　　(a) With respect to annual GAAP ROE:
　　(i) Explain possible reasons for a non-level pattern.
　　(ii) Explain possible reasons a particular year differs from the pricing ROI.
　　(b) Calculate Saturn’s 2003 GAAP free cash flow. Show all work.
　　(c) Saturn is considering a change to YRT reinsurance from the existing coinsurance
　　arrangement.
　　You are given the following information:
　　? The YRT reinsurance is on a 90% quota share basis.
　　? The average YRT reinsurance premium on 2003 issues is $0.55 per $1000.
　　? Average first year mean reserve credit on YRT reinsurance is $0.60 per
　　$1000.
　　? Average first year mean reserve credit on coinsurance is $0.71 per $1000.
　　? There were no deaths on contracts issued in 2003.
　　Revise the 2003 pre-tax shareholder earnings assuming term policies sold in 2003
　　are reinsured under the YRT arrangement, ignoring any impact on DAC and
　　investment income. Show all work.
　　Course 8I: Fall 2005 -4- GO ON TO NEXT PAGE
　　Individual Insurance – U.S.
　　Afternoon Session
　　高顿网校之旷世名言：用伤害别人的手段来掩饰自己缺点的人，是可耻的。